Carrington Adding Assumable Loans To Its Services

Carrington Mortgage Services, a private non-bank lender, is adding assumable mortgages to its list of services.

Assumable mortgages allow buyers to assume responsibility for a seller’s loan terms. This includes the current balance, interest rate, remaining term, and any other terms of the mortgage.

“Carrington is committed to ensuring borrowers have every possible opportunity to obtain a loan on the home they want,” said Greg Austin, EVP, Mortgage Lending for CMS.

“Assumable mortgages are another loan option that Carrington is educating home sellers and buyers about in this very complex real estate market.”

Buyers who have the opportunity to assume a mortgage with a low interest rate could see significant savings over the life of the loan.

Carrington is alerting homeowners who might consider selling their homes to this opportunity. Buyers who have fled the market for fear of high rates may be more inclined to buy if they can score a low interest rate from the last few years.

Assumable loans are increasing in popularity as buyers battle the affordability crisis.

“Historically, assumptions have not been a widely used tool, but we have seen the activity double year over year,” David Sheeler, senior executive vice president at Freedom Mortgage, told Bankrate.

Fees are also typically lower on assumed loans and appraisals are not required, adding to a buyer’s potential savings.

There are difficulties and downsides, however. Brokers engaging with assumable mortgages should be well-versed in the specifics. FHA and VA mortgages can be assumed, but USDA and Conventional ARM mortgages are only assumable under certain conditions. Specific rules that may make buying a new house difficult also apply if a VA loan is not assumed by another veteran. 

Also, if the current value of the home is higher than the remaining principal balance, the buyer will have to cover the difference at closing with cash or a second mortgage loan. A LendingTree example shows that if the seller has a $200,000 loan balance on a $385,000 home, the buyer will need to bring $185,000 to the table to compensate the seller for the equity they’ve built.

With equity at historic highs, the ideal buyer for an assumable mortgage will have a solid down payment prepared and prefer to save money over the life of the loan rather than at the beginning of the transaction.

“You’ll need cash or secondary financing to pay out the homeowner’s equity. Finding secondary financing can be a challenge,” Chris Birk, director of education for Veterans United Home Loans, told Yahoo! Finance.

CMS says its real estate arm is ready to help buyers navigate these concerns.

“Vylla Home, and our 1,300-plus dedicated real estate professionals, is uniquely positioned to work with buyers to identify which mortgages may be assumable,” said Chad Ruggles, SVP of Vylla Home, Carrington’s real estate division.

Carrington is a holding company whose primary businesses include asset management, mortgages, and real estate transactions. It offers FHA, VA, USDA, and confirming Conventional products, as well as products geared towards non-traditional borrowers.

It provides more information on assumable loans, including a video, here.

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